Entering text into the input field will update the search result below

McDonald's Q4 Earnings: Sales To Remain Weak But Margins May Improve

Trefis profile picture
Trefis
3.25K Followers

McDonald’s Corporation (NYSE:MCD) is scheduled to announce its Q4 and full year earnings on January 23. Although 2013 has generally been a disappointing year for the company, its shares have managed to trade in a narrow range. Expectations are low from McDonald’s on the back of tepid comparable sales figures, which were up only 0.4% through November. [1] Comparable sales, or same-store sales, is an important measure to gauge a restaurant’s performance since it only includes the restaurants open for more than a year and excludes the effect of currency fluctuations.

We have a $97 price estimate for McDonald’s, in line with the current market price.

Downward Pressure On Profitability

Through the three quarters of 2013, margins of the company-operated restaurants are down 70 basis points. [2] Operating margins have eroded partly due to a greater proportion of sales coming from lower margin products such as those from the Dollar Menu and partly due to weak sales. Higher sales help spread out the fixed costs over a bigger revenue base and consequently improve margins.

McDonald’s is trying to improve its product mix through the introduction of the "Dollar Menu and More" and other premium products such as the Mighty Wings. The upcoming results will help investors gauge the level of progress made by the company.

McDonald’s expects the cost of raw materials to increase 1.5-2.5% in the U.S. and 3-4% in Europe in 2013, which is a moderate increase. [2] However, in the event that sales remain stagnant, any jump in food costs is likely to put a strain on the margins. Overall, we expect the margins of the company-operated restaurants to decline 50 to 60 basis points in 2013.

Moving on to the franchised business, McDonald’s franchised margins generally tend to remain in a narrow range since the company doesn’t

This article was written by

Trefis profile picture
3.25K Followers
Led by MIT engineers and Wall Street analysts, Trefis.com helps you understand how a company's products, that you touch, read, or hear about everyday, impact its stock price. Surprisingly, the founders of Trefis discovered that along with most other people they just did not understand even the seemingly familiar companies around them: Apple, Google, Coca Cola, Walmart, GE, Ford, Gap, and others. This might include you though you may have invested money in these companies, or may have been working with one of them for years as an employee, or have consulted with them as an expert for a long time. Disagree? Consider these questions: •What % of Apple's stock price is iPhones? (Q: Is it 5%, 25%, or 50%?) •What % of Dell's stock price is Dell Notebooks? •If Bing took half the market share from Google Search, what % upside could there be for Microsoft’s stock? On Trefis you will get answers to questions like above. You can play with assumptions, or try scenarios, as-well-as ask questions to other users and experts. The platform uses extensive data to show in a single snapshot what drives the value of a company's business. Trefis makes the same content, data, and tools that are currently available only to professional investors today, accessible to everyone. Importantly, it makes the extensive data/tools easy to use and understand, allowing investors to leverage the platform in their decision making much more efficiently than anything else available. Trefis is currently used by hundreds of thousands of investors, company employees, and business professionals.

Recommended For You

About MCD Stock

SymbolLast Price% Chg
Market Cap
PE
Yield (TTM)
Rev Growth (YoY)
Prev. Close
Compare to Peers

More on MCD

Related Stocks

SymbolLast Price% Chg
MCD
--